As difficult as it may be, if you are working to get rid of debt, you must Change The Way You View Money. Our upbringing, peers and life experiences all shape who we are and how we view money. As you look honestly at your current debt, you must also accept that your view of money could be the problem.

1. Accept that your income is not guaranteed. While most of us have a secure job that we feel good about, reality is that no job is guaranteed forever. We have to look at our paycheck as not just income for the moment, but a plan for the future as well. Begin looking at each paycheck as an opportunity to plan for your future as well as pay your current bills. Don’t fall victim to the, “Well, I’ll get paid next week” trap of spending money you don’t have on hand. Remember that not all income is guaranteed to continue.

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We talked last week about making a debt payment plan.  This week we are going to focus on determining what debt you should pay off first.  We will also discuss 2 different methods – debt avalanche and debt snowball.  This is one of the most important questions to ask as you begin changing your financial strategy.  You really want to make the most of your money, and these tips will help you to do that.

So, What Debt Should We Pay Off First?

There are often debates about whether you should begin paying more toward your lowest account balance (debt snowball) or the balance with the highest interest rate (debt avalanche).  While both are great options, it can easily depend upon the individual income availability to go toward debt relief.

Pay anything that is in arrears first.  This should always be your first focus when getting rid of debt.  If you have any account that is currently behind on payments paying it first should be your goal.  That includes things like utilities, mortgage, car payments and any credit card or lender.  Get caught up on any outstanding accounts before you focus on paying more toward paying off debt.

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Now that you have set out your goals and created a budget, it is time sit down and begin Making A Debt Repayment Plan. This means you will be taking time to look at individual debt to determine which to focus on paying off first. It can also include looking at things like settlements, negotiations and closing accounts.

BEFORE you start trying to pay off debt, you need to establish a $1,000 emergency fund.  We talked about this last week when you set up your budget.  If you have $200 left per month after all your “must pay” expenses, that money goes directly into a savings account.  Once you get $1,000 saved up, you can move on to repaying debt.  Remember this $1,000 is for emergencies, not because you want a new iPad.  Focus on your debt relief goals.  You can do it!  The new iPad will come later.

MAKING A DEBT REPAYMENT PLAN

1. Get honest about what you can afford. This is the tough part. You really have to get honest with yourself and accept that you may be living outside your means. Look at your budget and start slashing items that are optional until you have created budget monies to get you caught up and start paying down debt.

If you have slashed optional items and still have no spare money, you maybe looking at a deeper financial need of more income. That is something we will deal with in future weeks, but you can begin now honestly evaluating your current job and income situation.

2. Focus on getting current first. While you want to immediately focus on paying off at least one debt, for your own credit score and financial security in the future, it is most important to get caught up on any outstanding debt you have incurred. If you are behind on payments, this is the time to work double time to get caught up.

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You are reading Week 2 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

Once you have set up your debt relief goals, it is time to look at your budget and determine how to make those goals happen. This week we will help you learn how to Make A Functional Family Budget. Budgets do not have to be a dreaded thing, nor restrictive. They are just simply a guideline to help you to stay on track and not over spend.

How to Make a Functional Family Budget:

1. Make a list of all monthly income. Make sure to include everything that regularly comes in. Child support, spousal support, employment paychecks, dividends from businesses and any self employment income. You want to have a good working knowledge of what you have to work with each month.

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You are reading Week 1 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.

If you are reading this then you probably already know that your financial situation is not where you want it to be. This week we will begin the process toward getting you out of debt.  We will start with Establishing Debt Relief Goals. Before you can make real progress on your finances, you must understand what you truly need to make happen.

ESTABLISHING DEBT RELIEF GOALS

Be honest about ALL of your debt. Now is not the time to pretend a debt doesn’t exist. Pull out all of your bills, creditor notices and even court cases pending due to lack of payments. Be honest about every debt you have. Include things like late utility bills, debts owed to friends and even that nagging student loan you have put off paying. It’s time to get serious, and that means full honesty with yourself and your spouse about the debt you currently have.

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